Legendary investor Mark Mobius warns that stocks still have further to fall as the Fed hikes interest rates

• Mark Mobius believes that there's further pain ahead for investors as interest rates rise.
• Tech stocks will struggle in particular as their cash flow dries up, the investing legend added.

Stocks will fall further as the Federal Reserve's interest rate hiking cycle continues, according to emerging-markets investor Mark Mobius.

In a recent interview, the legendary fund manager warned there's further pain ahead for investors despite the S&P 500 rallying by over 8% last month.

"We probably have another leg down as the Fed continues to raise rates," Mobius told MarketWatch last week. "I expect rates to go much higher and that means a number of companies will be in trouble."

Investors have grappled with rising interest rates since March as the US central bank attempts to tame inflation - which hit a 41-year high of 9.1% in June.

But sentiment turned more bullish last month after the Fed's chairman Jerome Powell indicated that he favored a softer, more data-driven approach to rate hikes.

Mobius has previously predicted that rates will have to rise as high as 7% to bring inflation down to the Fed's target 2% range. He warned the Fed will likely remain hawkish, thereby creating another headwind for struggling growth stocks.

"I expect rates to go much higher," Mobius said. "That means…the glamorous tech stocks with no earnings and dependent on more and more cash inputs will be in trouble."

Even after last month's rebound, the S&P 500 and Nasdaq have respectively plunged 13.3% and 19.6% year-to-date. Mobius added that he expects the sell-off to continue until markets reach a point of "complete surrender".

"Of course we must realize that we are already in a bear market but the endgame requires complete surrender on the part of investors," he said. "Currently, there is a lot of hope."

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